Skip to main content

On the mend

The euro-zone has come out of a long period of stagnation and will expand at a moderate pace over the coming two years. The recovery will be faster in some southern economies, such as Spain, than in core economies, notably Germany, while the outlook for France is now clouded by political risk. Meanwhile, inflation will continue to trend down in the coming months, but only slowly. Services inflation will be particularly sticky, given that the labour market remains tight and higher wage inflation is still feeding through. Against this backdrop the ECB will proceed cautiously with its easing cycle, reducing its key policy rate by around 25bp every three months until it has fallen to around 2.5%.

Elsewhere, the recovery in Sweden is likely to be weaker than in the euro-zone and will prompt the Riksbank to cut rates faster than the ECB. But we think central banks in Norway and Switzerland will leave rates at their current level for the rest of this year.

Become a client to read more

This is premium content that requires an active Capital Economics subscription to view.

Already have an account?

You may already have access to this premium content as part of a paid subscription.

Sign in to read the content in full or get details of how you can access it

Register for free

Sign up for a free account to gain:

  • Unlock additional content
  • Register for Capital Economics events
  • Receive email updates and economist-curated newsletters
  • Request a free trial of our services

Get access